Austrian Economics vs. Keynesian and Monetarist Macroeconomics | Jonathan Newman
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- เผยแพร่เมื่อ 2 มิ.ย. 2024
- Recorded at the Mises Institute in Auburn, Alabama, on 18 July 2019.
Mises University is the world's leading instructional program in the Austrian school of economics. Mises.org/MU19
Thomas Sowell said that losses are as important in an economy as profits because they show us what goods and services not to produce.
also he said this allows people with savings to take advantage of losses, purchase the asset cheaply, transfer wealth, and potentially improve the efficiency of the capital produced.
The world’s major banks went bust in 2008.
What does that tell us ?
@@jakebullet1731 fractional reserve banking does now work long term ??
What a great lecture for us in the general public.
Learned a lot. I found myself having to research a bunch of stuff just on the things he was bringing up.
The general public doesn't know a shit and are not capable
Most are capable but either unwilling or uninterested.
Seriously ( 2 y later) greatest aspect of social media
When I first started studying economics years ago, I wanted to be well rounded so I started by studying both the Keynesian and Austrian schools. It became clear to me very quickly that Keynesian economics was nothing more than apologetics for government control of the economy. Books on Keynesian economics seemed to deliberately obfuscate simple economic principles. I gave up on my study of Keynesian economics very quickly.
When I talk to business students, they have no idea what Austrian economics is...
@@WanderingWonderer808 yea thats sad as its, in my opinion, the truest form of economy
@Andras Ikladi Hi All,
Keynes, I am told, is often misunderstood. For example, Sir Maynard thought that gov' spending should not exceed 25% of GDP. Not what it is today. He also thought that during the good times a gov' should run a surplus and keep it for a rainy day when the increase in public was needed. Somehow, we have ended up with people thinking that Keynes was all "spend, spend, dpend"; he was not.
Cheers
@@tjhughes7740 True enough mate, but I think that to say that debauching the currency is Keynesian is plain wrong. It would be good to see what most of us would do if we were setting up a financial system. I would have no debt or tax increases without a referendum and the gov' would have to save money it wishes to spend later. I think Keynes would have approved of that approach more than just MMT nuttiness.
I recently saw Krugman claim that Austrian Economics is some sort of "unfalsifiable" voodoo that's more philosophy than science. To the degree that this is true, I have yet to be convinced that the alternatives -- Keynsian and Monetariests -- are any better.
At this point, I'm convinced that Economics probably shouldn't even be considered a science at all. Of all the "soft sciences", it *seems* the strongest, since it uses a lot of the tools physicists use (in particular, calculus) that other soft sciences don't (at most, they'll use statistics, which barely qualify as mathematics (unless one is exploring the geometry of statistical spaces...)), but its predictive power still seems lacking.
For all its "unfalsifiable" voodoo, Austrian economics seems to have better predictive power than these other schools of economic thought!
25:40 I just wonder how is it that only the Keynesian model is been taught in state funded universities? I just wonder..
“Austrian’s predict price inflation, Keynesian’s make excuses for why it happened.”
Price stability is purely a Keynesian idea not a monetarist idea. Monetarist advocate stability in money supply growth and let inflation and recession sort itself out. No monetarist has ever advocated targeting inflation. Price stability is purely a Keynesian idea in not letting prices drop too much in a recession and not allowing them to rise much in an inflation. Price stability is linked with Keynesians wanting to expand money when deflationary pressures exist from demand side recessions and curb inflation in demand side expansionary periods. They are diametrically opposed. Friedman writes in plain English that government spending and monetary policy is more unstable than investment and reactions to economic circumstances does more harm than good. You don't target prices. You keep monetary and fiscal policy stable and let prices do what they will. Friedman says clearly government spending isn't the balance wheel. That is why Keynesians and Monetarists don't get together and "hug". For Keynes investment was the cause of recession and inflation. For Freidman government policy was the cause of recession and inflation. He didn't advocate the government stepping in during the Great Depression he argued the government caused it by cutting the money supply! There is a huge difference in they shouldn't have cut the money supply, note a real decrease in money not the growth rate of money, vs. banks should have been bailed out and the Fed fix it like Keynesians advocate. Friedman never once advocated a bail out. You either haven't done your homework on this or you are just outright lying.
I'll miss Dr. Garrison's lecture. I hope someone can expound on his excellent "Time and Money." The most important Austrian work since it was written.
Velocity of money is the speed and direction of your money as you pass it to the clerk.
Heh, the only meaningful definition.
Yes, but substitute 'wife' for 'clerk' and it increases greatly.
@@613yechiyah well done 🤣
This was pretty good. Thanks Newman 👍
That is a glorious beard.
Excellent teacher.
Amazing lecture! I learned so much!
2014 Brazilian Crisis ("The New Macroeconomic Matrix").... another victim of Keynesian Economics.. WHEN WILL WE LEARN? =(
Kaynesian macro is just a justification for money printing and bailing out greed (the "malinvestment, overconsumpltion" diagnosis of Austrian macro basically comes from human greed, which is the main reason for the cycles). Anybody with any shred of common sense can see that Kaynesian macro requires some weird mental gymnastics and leaps of faith. But it fits the political narrative so well by justifying government control of everything in the economy.
Velocity of currency makes sense. If I think costs are going up, people buy now in excess to stave off later costs. If prices fall, spending decreases as value is perceived to be low.
Which one uses gold and silver
I found this very helpful and informative. It was very Interesting, thank you!
How do these schools of economic thought deal with market manipulations like monopolies and vertical market integrations?
Now I'm beginning to understand why Jesús Huerta de Soto despises Friedman so much.
Friedman and de Soto both made mistakes on monetary theory. I think of it like this: De Soto is better on the effects of inflation, and Friedman is better on the effects of deflation.
Look at the history of what Friedman DOES!! Friedman is a living example of what Bastiat says in The Law: "THE POISON AND THE ANTIDOTE ARE DEVELOPED IN THE SAME LABORATORY" Yeah, I hate him too... I draw horns on his head every chance I can get! IMHO
@@austropunk3535 M Friedman was one of the most eager supporters of reduced gov'bureacratic spending, which is essential to the effectiveness of any form of money distribution /money dynamics, and thereby essential to stabilize money and avoid too quick inflation. That is *why* he for example suggested the NIT model (lower taxes for all, reduced welfare bureacracy, automated income safety for the low income and financially lower middle class) .
Less private spending in the national economy is equally stupid to more state spending ,but in a gold standard the difference is much smaller. The future GS will be a digitalized blockchain, with pluses and minuses to that in several ways
@@KibyNykraft That's very presumptuous to think you know what the future of the monetary system will be. Quite anti-Hayekian.
27:57-30:08 This is misleading. The equation of exchange in an identity. It's true by definition, and that's the intention behind it. Velocity is roughly the inverse of the demand for money, a concept in which Austrians use. And the price level, while an abstract (and never perfectly measurable) concept, allows us to distinguish between 1) changes in relative prices and 2) a *general* change in the trend of prices, i.e. inflation or deflation.
Agreed. I am grateful to the speaker for defining these 3 schools of thought. But after seeing the video, I think Austrian economics is bonkers, whereas there is something to learn from the other 2. That is, despite some of the surely wrong assumptions that they make (velocity of money being constant, government spending not being sticky as well). Austrian economics don't even provide a direction for how to improve an economy (increase real growth & make it more stable). It says that you should let it be as it will naturally improve with time (at least according to how the speaker explained it).
As you say, how can he state we can't know that an increase in M would lead to inflation. Perhaps if deltaM is small (below real growth). Otherwise why don't we just print the state budget? We could do away with taxes completely :-D
Radu Miron a lot of what you said is silly. If you read Selgin and Garrison, then you’ll find Austrian Economics has more to offer than you think.
There is more than that that is misleading. Monetarist like Freidman don't argue the Fed should have stepped in during the great depression nor do they argue the Fed should use monetary policy to fix a recession. Monetarist argue that the Fed caused the great depression and should not have cut the money supply in the first place, in fact they would say the fed shouldn't have acted at all but keep the money supply growth stable not increased it. It is closer to the Austrian in that the recession should run its course while monetary growth is stable. Price stability is not the traditional monetarist goal it is stability of the money supply. While Freidman and other monetarist agree with Keynes on the effects of policy they argue government is more unstable than investment and reject the instability of investment due to "animal spirits" argument. Like the Austrians they say don't react. That means don't increase the rate of growth due to a recession and if monetary growth is stable you don't need to change it to fight inflation. Friedman clearly argues that government action is the main source of instability in the economy not a balance wheel as Keynes argued. So the monetary supply and government policy should be stable and not reactionary to short term economic conditions. It doesn't advocate increasing monetary growth to combat recessions. That is why they don't "get together with Keynesians and hug". The ideas of non-intervention are much closer to the Austrian school than Keynes' intervention. I realize it is a short overview but it is intellectually dishonest to not make this distinction. Monetarism has built off of micro foundations with Friedman's students Sargent and Wallace with rational expectations. To paint Friedman as an interventionist is just dishonest and like saying Smith agreed with Marx. It is that far off.
@@radoomiron93 The Austrians have a long term growth goal. As a growth economist I would say it is more than just about savings and investment. Still, it just doesn't focus on fixing the short term but rather setting up the long term which I agree with. The idea is long run growth. As an economist who has studied growth, I think Austrians just haven't advanced here. Capital accumulation through savings and investment will reach a steady state and technological growth isn't manna from heaven as Solow proposed which I why cringed when he quoted Solow. Solow was exactly what Hayek warned about in the pretense of knowledge speech. Long term growth comes through investment in human capital, process innovation, and product innovation. It isn't a simple savings for entrepreneurs to acquire capital. Many growth economists have come to a similar conclusion to the Austrians that our focus should be on long run growth and let the recessions settle themselves out. The focus on consumption can be the anti-thesis of growth. So I agree with them on that but the focus on purely physical capital is off.
@@austropunk3535 Selgin isn't really an Austrian.
This should be a contentious discussion. From the extreme right of Austrian economics book keeping to the rational Keynesian based demand-pull economics. Growing the economy via Keynesian demand-pull strategic selected multipliers and MPC can be measured, increased and managed. An increase in growth, starts with demand fueled consumption delivered by production which accelerates in a full employment economy, (now being enjoyed) not the reverse. Buttressed by M3 money supply and interest rate decisions to ameliorate and growth related inflation, so we stay at a deflationary, rather than temporal volatile disinflation.
wait at 2:10 it's Mises and Rothbard vs Friedman and Keynes but I thought Friedman was an austrian economist? Can someone tell me if I'm right or wrong?
Friedman was Chicagoan/Monetarist
Friedman was a theorist of the Chicago school of economics, which was developed by
Frank H Knight at around the same time as Keynesianism.
The Austrian school was developed by
Carl Menger during the marginal utility turn.
The core difference between the schools comes down to their preferred method of conducting social science.
If you would like to know more, a TH-camr named Academic Agent has an informative video on the differences between the schools that also goes over there history, accomplishments, and key thinkers. He also has several videos on other famous Austrian economists.
essentially seems to boil down to Free market lovers (Austrian) who believe that the natural boom bust cycles work themselves out and any attempt to interfere only makes the problem worse vs. Authoritarianism (Keynesians) which feel you must constantly interfere in an inherently unstable system to reduce economic pain as much as possible.
I believe in Austrian economics. You can't change the essence of nature. There are good times and bad times in politics, economics, personal lives, social trends. Assuming you can make sure there are no bad times and only good times is the way an infant thinks.
Now I know many of you are probably thinking "but can't we use our intelligence to improve a situation?". As long as you don't change the essence of a thing that's fine. If I'm playing basketball and I am having trouble scoring baskets I can work on my dribble, drill on shooting, train with a coach none of these things interfere with the game. But if I change the rules to say every time I make a basket I get 20 pts. and everyone else on the court is still awarded 2 pts for a basket, yes you've improved my situation but corrputed the game.
There are intelligent ways to try and soften boom bust cycles which don't interfere with free market capitalism. But money printing, price fixing, bailouts, etc. all change the very nature of the system. Keynesians go from an "unstable system" to a "biblical catastrophe" in a heartbeat.
One of the clear earmarks in which system is correct is when you start hearing things like "Animal spirits". I burst out laughing when I heard him say that. So investment expenditure is the result of "animal spirits?" I would assume it's the result of an improving economy and more access to capital. People will always increase investment expenditure if the economy is expanding and decrease when the economy begins to contract.
But whats Australia got to do with this
You should read twice if need be.Not Australia but Austria economic known as classical economics.
@@MrAlf30 I believe it's a joke.
lol
Dim please no, we have enough of them here already 😭
Austrian economics was founded in Vienna, Austria, hence the name
Did I miss the Austrian equation?
I'm gonna have to take a micro econ course in college, which of course uses Greg Mankiw's book. I'm glad I found the Austrians b4 betting hammered by Keynesian nonsense.
Did you read Mankiw? I am not crazy about his macro book but his micro is very good. The book doesn't hammer anyone with Keynesian nonsense. It discussed Keynes but also pointed the problems well and showed how economic theory has advanced. I would still use Mankiw over a lot of textbooks that hammer people with the Keynesian cross and distort facts like prices and wages were sticky for 3 years of the depression to prove Keynes while ignoring those were the 3 years that Roosevelt had price and wage controls. I also liked Ruffin and Gregory written by 2 of my former professors. They showed the Keynesian model but being Chicago guys did a good job of showing why it was wrong. You wouldn't find a guy more against central planning than Roy Ruffin when he was still around. I almost walked out of his class day 1 because he was wearing a hammer and sickle tie. Boy was I wrong first thing he explained he bought that when the Berlin wall fell and he made it clear he was going to tell why it happened. He was wearing it in celebration of the fall of communism. I still kind of chuckle thinking about that.
Yeah, Austrians aren't nearly as critical of the microeconomics expounded by Keynesians. It is Keynesian macroeconomics that they find absurd.
real good stuff
I kicked any holdings to Chicago economics because of this lecture. Many before shook it loose first
You can see how weak they are by considering that Velocity V is
determined by the rhythm which governs individuals and firms spending behavior. This gives k, i.e. cash holding coefficient on average and V = 1/k. He maintained V has nothing to do with individual decisions .
Agreed, explanations started to breakdown here. His elaboration about individuals not considering V in their daily decision-making is like saying such persons do not consider M in their decision making either, but that doesn't mean either does not exist.
@@zubstep The money supply has an large effect saving vs spending, sure one may not directly consider it, study Fed papers, and then make the decision to buy some lemonade from the local grocery store, but indirectly prices may rise or decrease as an result of the change of the money supply, as does income. This most definitely has an influence on the will to purchase something. Again, V is merely just an stand-in that exists due to other variables in MV = PQ, it is purely descriptive, and has no real affect on prices/income, and is just used for determining the rate of inflation
This is great
"If you want to be a great leader,
you must learn to follow the Tao.
Stop trying to control.
Let go of fixed plans and concepts,
and the world will govern itself.
The more prohibitions you have,
the less virtuous people will be.
The more weapons you have,
the less secure people will be.
The more subsidies you have,
the less self-reliant people will be.
Therefore the Master says:
I let go of the law,
and people become honest.
I let go of economics,
and people become prosperous.
I let go of religion,
and people become serene.
I let go of all desire for the common good,
and the good becomes common as grass."
Tao Te Ching, Chapter 57 - Translation by S. Mitchell
That's brilliant! I've read the Dao De Ching, but I don't remember that part. I applaud your creativity!
Nobody seems to take into account external influences on the economy, such as crop failures or surpluses. The drought and Dust Bowl effect reduced the production of food during the 1930s. Variation in a major input are bound to make the top line wobble a bit, but it's no reason to panic.
It would help illuminate these discussions to listen to some experts in control theory talking about stabilisation and the limits of the process in the absence of valid real-time data.
A very good case can be made that the problems of the 1930s were caused by policies in the 1920s. (Caution: Gross simplification follows.) Before WWI, the US sold food to Europe, in exchange for industrial goods. During WWI, the US built up manufacturing industries. After the war, to protect those industries, the US imposed tariffs, but leant money to Europe to buy food and goods for which they otherwise couldn't pay. Lending money to a bankrupt customer isn't a good policy. By 1929, the US had too much fixed capital, (factories, &c.), but no working capital to employ it. (If you spend so much on your lemonade stand that you can't buy any lemons, you don't have a business.)
I wouldn't say no one mentions the dust bowl or other supply side effects. It really depends on the text on how time you spend it on. Diehard Keynesians hate talking about the 1970's caused the death of Keynes eventually. Keynesians are still trying to rally and put micro foundations in tough. So it really depends on the text you use as to how much this is talked about.
@@johnweatherby8718 Keynes' most toxic legacy was probably the current central banking fetish for inflation at 2% as somehow necessary to support the economy.
When you talk about Austrian "economics" then Hayek is the definitely the major personality
Not only he argued against the socialists but also keynesians his works in knowledge are part of mainstream too.
I dont think that Friedman was that dump to say "let's stabilize prices".
He understood, apparently, that it is not possible a and it is dangerous.
In his book I think it was Capitalism and freedom? He proposed to just increase money supply in economy by stable rate.
I’m a bit late but yes it was capitalism and freedom
Watched ✅
learned a ton
19:29 this is not the Keynesian AS ' hockey stick' curve, it is the neo-classical (SRAS deriving the LRAS) response.
Of course there is such a thing as a price level. It's a snapshot of prices as they exist at any one time. If you increase the money supply by a large amount, prices will rise, as we have just seen after Covid lockdown QE. That isn't "untenable", it's been demonstrated over and over again. Friedman charted the quantity of money per unit of output next to the CPI for many different nations over many different time periods and unequivocally showed a correlation. Hyperinflation happens when governments print money as if it's toilet paper.
Great lecture. Sounds as the same voice as @Econclips.
I think that the point in the monetarist view is not making prices in general stable. They need to fluctuate in relation to demand and supply of the good (as Jonathan pointed out), but to fluctuate due the lack of money in the economy sends noisy signals to the consumers and producers. Friedman said, many times, that he would be in favor of abolishing the FED and just have a computer that would create money at the same pace as the creation of goods. He points out that the huge drop in money supply over 1930-33 sent disruptive signals to the supply and demand chain, since the drop was huge.
So using their analogy, the Chicago's solution to the Mississippi cabbage eating monster would be to get rid of cabbages, rather than stopping it from appearing at all.
Are we just gonna gloss over the fact that MV = PQ is a bogus equation?
Let's do some basic algebra:
f1: V = PQ/M
f2: MV = PQ
Now we do basic substitution
M(PQ/M) = PQ
The Ms go away as M * PQ/M = M/M * PQ = PQ
And what we get is
PQ = PQ
Alright I'm no economist and have no knowledge on the matter but I do have basic math knowledge and a working brain.. doesn't this tell us that MV = PQ is just a bogus equation to overcomplicate a tautology? M doesn't do anything and neither does V, as they define themselves out of existence as soon as you sniff in their general direction. At that point you might as well just say your theory is based purely on PQ and call it a day
Edit: alright this is addressed in the video. Yes, MV = PQ is just PQ = PQ with extra steps
shouldn't it be most important to discuss where the newly created money goes to?
Goes to the government. The Reserve prints money to fund Gov. debt. In a Yale article out recently there are economic professors claiming that that will be the solution to funding COVID recession... worst idea ever (from an Austrian economics perspective)!
Thank you for posting 🙏🏻🙏🏻
Who needs to know the velocity of money? What economic actor is that?
17:10 Who’s rule is that 😂
I don’t think the criticism of money “circulating” makes any sense. Everything that circulates is at a specific point at a specific time. The definition of circulation is that something is changing position over time, so you argued by making a point your opponent would agree with and is one of their premises to begin with.
Why does this lecture skip discussing New Keynesian and Real business cycle models? Why compare to the outdated "versions"?
I've been viewing Austrian-based discussions lately and they all seem to compare themselves with the old keynesianism and monetarism, why? Almost all current research in business cycle theory is derived from microeconomic foundations, just as in Austrian economics. I find it extremely worrying that a professor completely circumvents the latest developments in these schools of thought. Perhaps it is okey if this is a course on a Bachelor level (is it?). Or perhaps I just missed it, if so, please let me know.
It is very probable that all these theories bring something important to the table. But the assumption that the removal of artificial credit expansion would somehow yield optimal movements around the steady state or long-term growth rate of the business cycle (as in real business cycle theory) is also an extreme assumption. There are so many factors that affect the business cycle that it is impossible to rely on these simple assumptions, (e.g., expectations, long-run expectations, behavioral aspects causing endogenous movements of the business cycle, financial market stress, limited rationality or asymmetric information, hysteresis and a ton of market imperfections and failures). There are also numerous studies showing that both real and nominal frictions exist in the economy, which MAY give cause for some policymaking (though it should be tempered, as shown by e.g., Austrian economics and other considerations such as Zombie firms).
What I am trying to say is: it is dangerous to compare these theories in the way done in this lecture, in my view. That is not to say that current macroeconomics (practical macro) should not be reviewed and updated, e.g., current non-standard monetary policy should be reviewed, and perhaps moderated.
Ah yes, retain the status quo, because the allopathic approach to econ has worked out so well thus far.
asymmetric information (its alleged consequences) isn't a thing you know, and you're starting from the wrong foot anyway. From your comment you seem to imply that the study of economics is like a natural science, that if you just knew all the variables then you'd be able to understand it, like an enigma machine, possibly even control it to a desired end. This is exactly the type of thinking that Hayek described. The economy is the countless interactions between humans, and if you've had any psychology class, you'd know that humans react differently to different stimulus, so the idea that there is these homogeneous rules applicable to all people, and that these can be employed to understand the 'larger picture' is just wrong, and it works as an approximation at best, like public opinion, unable to 'predict' the ebbs of the market.
Thank you for listening to my tedtalk
@@newthirx4311 Thank you for the comment, much constructive. However, these models (DSGE but also others) don't need to rely on perfect markets, homogenous and perfectly knowing and optimizing agents. Many of these models nowadays embed psychological factors and non-linearities. I think that you made a solid point against typical rational expectations DSGE-models in general, however, the main point I was making was that it is misleading to refer to these "old" versions of NK models (as done in the video). And the reason I commented was because it was something I also noticed in some other Austrian Econ. videos, I just find it worrying
I stil say that govenment spending should be at the bottom of any keynesian graph... it sets the precident that government spending is good.
holy crap i know this guy
Trippy
Hello, Andrew! How have you been? I still remember your snowman Post-It note over the thermostat.
lol If there’s no such thing as price level then what is it that we experience when money printing leads to inflation? It’s the price level going up, and that is a bad thing. And it’s right to try and measure it, however hard it is to do. We do want prices to be stable. That doesn’t at all preclude necessary changes in prices set by healthy free markets.
Anyway, a lot of dumb and bizarre criticisms of monetarism from the Austrians but it’s a good video. I appreciate them explaining themselves.
There’s no such thing as “the price level”. It’s a mathematical fiction. Inflation is an increase in the supply of money, which often, but not always, leads to an increase in the price level.
Trying to make prices stable via monetary policy while simultaneously trying to let the market determine prices (which may not be stable absent intervention) is self-contradictory.
this guy is so sure that wage is the marginal product of labor...Then why labor productivity is raising and at the same time real wages stay stagnant?
also another question : i suppose that in 08 , we should ve just let the system go, let the .."bust run it's circle "?
When America and Europe printed a ton of money it wasn’t going to cause inflation immediately because the inflation already happened and deflation would occur. It this caused China to print truckloads of money after the crisis so will this not lead to inflation in China that causes inflation throughout the world. Or with this just lead to their own credit crisis and deflation.
Love this guy!
Investment spending isn't dependant on income? What?
It's dependant on savings not income ... at least in a free market economy. In an artificially manipulated economy, where interest rates are controlled by a secretive group of people at the FED, investments are controlled by those artificially manipulated interest rates. This results ultimately in the boom-bust cycle, because creating new money (artificially lowering interest rates) does not create new resources.
@@Lord_Volkner Thanks for the response man my thought process was that simply that the 2 must be heavily linked. If income falls then surely spending on investment will fall as there is 1. there is likely decreased Marginal propensity to save as incomes have dropped and 2. despite Marginal propensity to consume increasing it is still a smaller total amount of spending than when income was higher meaning less incentive for investment spending.
@@Swift-mr5zi I think I follow your logic and can't disagree. I think the housing bubble was a demonstration of what you are saying. The "bubble" was the difference between what houses cost and people's ability to pay for them (i.e. income). This, however, was the result of artificially manipulated interest rates. The excess investment into building new houses would never have happened in a free market system. The lack of people's ability to pay for the houses (reflected in their lack of savings) would have raised interest rates and prevented the investment from taking place. Is this what you mean?
Unfortunately, due to the artificial nature of interest rates in our present economy, there is no correlation between savings (a reflection of income) and investment. The consequence being a constant sequence of mal-investment then market correction, a.k.a boom-bust.
@@Lord_Volkner Yeah man we get each other gotta abolish the fed/central bank ay. and trump lowered the rates recently right as yields on Germany bonds become negative, not looking good for the global economy.
@@Lord_Volkner The counter to your point is that in a bust, resources are not being used. This may have a variety of causes, but the one factor controllable by government is the money supply. So lowering interest rates allows for the utilization of unused resources, even if the initial cause of that lack of use has nothing to do with availability of money.
Only Bitcoin and Gold will save us...
Watched the whole thing, and if anything, it helped me get more convinced about Monetarism. You can't just discount sticky wages like that. It's not just about workers saying no -- it stems from the efficiency wage theory where it might demoralize the workers and cause them to work less hard for you.
When you print money you are devaluing the currency. So you are still lowering wages, just without openly disclosing it.
@@jakemeadows3478 yes, but openly disclosing it is generally what causes the problem. People dont do the full analysis.
Demoralising workers doesn't matter if you can't afford to even keep them on in the first place (take what's happening in the airline industry and restaurants).
@@malhard4268 I think you misunderstood my argument. Austrians say that when aggregate demand is slow, the prices can just adjust and fix the problem. Keynesians believe, as do I, that employers don't want to lower nominal wages for fear of demoralizing workers, so rather than that, they'll just lay off the workers, and keep the few that they have at the same pay. This will reduce Real GDP rather than the price level.
@@kunallobo4136 Right, but correct me if I'm wrong but a reduction in real GDP will lead to a change in price level because consumers have less disposable income to purchase certain goods and services?
@33:00 This is the crux of this lecture, as far as I am concerned: THE GREAT (Monetarist) DEPRESSION explained... The Arrows (Monetarist imaginary arrows...) have pierced the hearts of Americans!
And yes, Monatrarism is "Data Driven", so they MUST distort all the history books in the process...
@37:00 I would like to know the source of the quote(s) of MISES....
@38:30 Prices need to be ACCURATE, or they are just the result of implicit price controls...
The Monetarist tendency to cling to the predictions of "Models" despite the facts, is similar to what I call the "CO2=Warming scam"...
What do you mean by the CO2=Warming Scam? CO2 causing global warming is a scientific fact.
@@raeidm.raunak4927 "...scientific fact." No it isn't. Do the math. CO2 is what percent of the atmosphere? And how much heat does CO2 absorb? Not much! Hardly any actually! Anyways you should know these two bits of data, so do the math! It's an established hoax. IMHO
@@raeidm.raunak4927 Sorry about my sarcasm... Because of the high profile, and conflicting agendas supporting the CO2=Warming hoax, it is a hard nut to crack. I believed it for 25 years! Just 'cause somebody said so...
SO: CO2 is 450 ppm = .045 % of the atmosphere. SUPPOSIDLY a .015% increase. NOT MUCH!
And here is a link to a chart of so gasses that absorb upgoing infrared radiation.
commons.wikimedia.org/wiki/File:Atmospheric_Transmission.png
You will notice that water vaper absorbs most of the frequencies that CO2 could absorb. Water vapor absorbs upgoing infrared radiation much better then CO2, because takes the heat, and forms our good or bad weather. Good Luck! IMHO
Joe Morton Yeah, but the last time that CO2 was this high, the average temperature was 2-3 degrees c higher and was 3 million years ago. The average sea level was also roughly 50-80 feet higher. CO2 is also the most abundant green house gas.
@@raeidm.raunak4927 Yeah but the CO2 was actually 7000 ppm 3 million years ago.... CO2 had nothing to do with temperature. It is a trace gas. It absorbs very little heat. So why do you believe this stuff? I suspect you have common agendas with the folks who tell you this. Anyways, others have conflicting agendas to say the same thing! Those who want more nuclear power plants have been saying this stuff since the 1970s. The environmentalists are new comers to this scam. The carbon banking scammers came after them... Dr. Arrhenius' flaky CO2=warming idea was disproven with in three years. And that was over 100 years ago. I don't think the CO2=Warming idea needs scientific refutation today. It's all politics supporting scammers. IMHO. en.wikipedia.org/wiki/Svante_Arrhenius
The thing about money is it's based on faith. Even if they print too much (they do), it's like the Stone Soup Fable. If the people believe there's something to it, there's something to it. Inflation always lags behind the true value decline, because (for one thing) it takes time to change all the prices in the store, there are contracts based on the value of money when the deal was signed, but most of all, the PERCEPTION of what $5 means lags behind the devaluation.
let's talk about mark to market accounting law in 2007.. Cause that was probably an underrated problem
Is he an Austrian?
Because of MMT Keynesians, the USD will be completely devalued & will have to be transformed when it returns. If only everyone loved Monero or even a Silver-backed crypto.
Who do the rabbits represent?
What is it, that can be outside the economy? To many unknowns (holes) in the presentation/explinations.
Austrian economist conveniently ignore the Erie Canal, The transatlantic Railroad,
Eisenhower's Continental highways, The Panama Canal, Etc in the building of America's industry. These are all government programs which are critical to America's industrial might
You misunderstand the entire lecture and school of Austrian economics. Austrian economists are not anarchists that believe that government should never do anything. Rather, it is largely focused on dissuading government from attempting to control the boom/bust cycle of economy through monetary policy. Key word is MONETARY policy. The government does have some role to play in fiscal policy, such as roads, bridges, police, etc. But attempting to control the economy through currency and credit expansion/contraction is a fools errand.
We don't.
landlords don't reduce the rent according to the tenants income. So thats why wages are sticky. Especially now with most Landlords having borrowed to buy the property. It all comes down to that Federal Bank proverb ' the borrower is the servant of the lender' . Does'nt matter which school you are from.
Land is also governed by offer and demand just like everything else. If people are unwilling to rent for the current price, the price goes down. Any dollar is best than 0 dollars.
@@eJuniorA2 but permissions for development into housing is not....so its not elastic . So you are wrong.
@Elizeu Angelo you can't expect free market movement on rents when the underlying supply to the housing market is tightly regulated and underpinned by largely by credit
aluminiumfish of course you can't expect a free market to be working if the market is regulated, thereby making it not a free market
40:20 Woah, completely incorrect. Friedman criticized the Fed's active contraction of the money supply during the Great Depression. You have reversed it as though he called for an equivalent of QE on a stable money supply, which is a-historical nonsense. As a matter of fact, the money supply fell, thanks to the Fed's work, by about a third over only a few years.
You forget to mention the rest of the government.
40:04 …without owner..
To think that Friedman gave an atta boy to Greenspan makes me very suspicious of all this economic theory and manipulation. I remember the markets and the money men hanging on every word of Greenspan's trying to figure out what he was going to do for their highest returns. In other words markets must be constantly manipulated and we argue about how much it is done by men in suits that went to college?
My return on money is zero unless I receive e-statements have on-line access to log in once a month and complete 12 debit transactions a month I can earn, or be blessed with, $25 worthless dollars a month. Supposedly the nationwide members of the credit unions thought this was a good idea.
Non-market = non-voluntary 🤔
i have discovered the nature of money that would provoke the gold and cryptocurrencies market crash. If you buy put options on gold and with your influence make my theory on money known provoking the gold market crash you would become rich. Being everything else the same a country with no gold is wealthier than a country with gold that protects the mineral inside a vault. Being everything else the same imagine a country with a baker, a fishmonger and a singer with no gold and another with a baker, a fishmonger and a guard to protect gold inside a vault. Which one lives better? Which one is wealthier? The country with no gold is wealthier because the baker and fishmonger get entertained by the singer for their money but the country with gold have to work to pay the guard to protect a mineral that offers no wellbeing or wealth because is useless inside a vault. An analogy would be an innocent kid after saving his pocket money buys a bicycle and his father tells him that he can store the bicycle in a garage unused to sell it in the future, but the rent of the garage would cost him some of his pocket money or he can use and enjoy the bicycle. Which option would the kid choose? There is not benefit in buying to sell because no value is added. Do you understand? The gold becomes wealth when is used, sparing the cost of protection. Because gold is increasingly more expensive to dig out as there is less underground and is increasingly cheaper as there is more on offer overground there would be a point when nobody would be mining the mineral. How much cost the taxpayers to protect gold? Cryptocurrencies are a number but money is transferable debt, a number and a name. Who would sell last? Communist or capitalist?
Is there any economic theory that actually accepts the fact that the main issue has always been the accumulation of wealth in seldom hands? And add a new huge factor which is the technological automatization and substitution of human tasks. This was a factor in industrial revolution, and a bigger factor in currently criss. Obviously, the newer the technologies, the higher it's impact. These are the only two factors the government should regulate for a stable economy.
39:39 😂
19:44 Not true that it's strictly Keynesian concept. Economists from over 100 years prior believed that prices, including wages, didn't adjust instantaneously to market conditions.
After watching a number of lectures and debates, I'm starting to wonder if it is possible for any Austrian economics expert to talk about any other kind of economists without constantly insulting them. Which is incredibly annoying, unhelpful, and unscientific. And I thought political science (that I studied at a university) is opinionated.
Objectively speaking (across all of science, especially social science), outcomes-focused empirical data-driven science that doesn't have a perfect theory yet is a valid approach, while a "perfect theory" that doesn't have enough empirical support to have any real predictive power is another valid approach, but with inverse, fairly equal problems.
For example, can the Austrian model, when realized ideally, ever achieve anything that an Austrian school economist would call a failure? If even recessions, A.K.A. bad macroeconomic outcomes for many people, are just necessary learning opportunities, how can the Austrian school theory be falsified? Or is everything it leads to best by definition? It isn't illogical to argue that the theory of economics having flawless internal logic isn't anyone's economic goal.
Also, perfect logicking offers no value or solace to, say, any child who happens to live in a free market economy where the market as a whole spontaneously decided that leaving them behind without education or healthcare was the best expression of what everyone wanted, or that ensuring them having an equal opportunity would have been wrong by default because it would have happened by force (at a cost of, let's be real, minor inconvenience for everyone) and would have also been a waste of resources.
This philosophy reminds me of Jen from IT Crowd, when she was confronted by an IT expert over her horribly infested computer and replied "I have it how I like it".
What in God's Earth are you talking about? "The United States is at the peak of its performance..." What is the performance of the United States? What does the United States perform. Do we citizens know that the United States is supposed to be performing something and that we are being graded on it and that there is some level of performance that is ideal? Then that quote goes on to say, something about inflation at 2, 3, or less percent? That statement means anything less than 3 percent. I call that hogwash.
If you're a Keynesian after all time and evidence you're a pinhead.
Keynesianism and Monetarism smack of authoritarianism. No thank you.
What I think should have been the main point of the video is kind of glossed over here. That is building models from empirical data backwards or starting from a logical deduction you are testing. This really gets down to positivism in economics and why Austrians are considered "hetrodox". Mainstream economics is based on the positivism ideas of what is science. That philosophy says you start with a testable hypothesis. So you distinguish positive statements which can be proved by fact from normative statements which are often about morals and opinions. This is really the main crux of the difference between Austrians and Monetarists. Austrians tend to reject positivism. While the whole video is based on this difference it isn't really brought out but kind of stated in a sentence and moved onward from. The Austrians are about deducing from first principles and see positivism as a way of proving what could be a falsehood. It is something I am still getting a handle on and plan to read Hayek's counter revolution next to get a better understanding of the Austrian perspective here. They certainly aren't anti-math and data as some claim. The marginal revolution put us here but they are more cautious about if the scientific method is misapplied. The video gets into weeds of things like does velocity exist of can you trace the general movement of prices without really explaining the key difference here. While Keynesians and Monetarist are diametrically opposed on policy they are stemming from positivism and sort of the idea we aren't explaining how people think but how they act. The Austrian think more of how people think needs to be explained from my understanding. In mainstream economics there is a caution to data mining or just getting empirical data and building a model from it but sometimes does work backwards from what we know from data. Keynes is notorious for this in I have these empirical results so I will spew a bunch of BS about animal spirits and if I can predict from MPC and MPS then who cares my model works well until it doesn't. Particularly neo-Keynesians think this is the better way to go.
While you are right we can't ask Friedman about the housing crisis we have video evidence from one of his students explaining why it happened. Sowell has talked about this and I don't know if he predicted it but, he certainly has given an good explanation of how Barney, Frank, and Dodd forced banks to give loans to borrowers who couldn't pay then blamed them from doing it afterward. There is clear video evidence of interviews where he explains how government caused the problem and it wasn't just a exogenous fluctuation in investment nor mal investment due to the money supply. It wasn't monetary policy as Austrians would predict. It was a social justice agenda that threatened banks with regulation and punishment if they didn't give out loans to people who couldn't show they could pay them back. Things like Ninja loans were pretty much forced by Barney, Dodd, and Frank with threat of lawsuits and regs if they didn't comply. Then Barney, Frank, and Dodd punished them for doing what they told them to do. Sowell clearly points out this was a government regulatory failure and all they learned was they could get votes blame it on someone else when it failed and do it again. There is a coherent Chicago School explanation vs. the Austrian well it was just because the money supply was expanding even though it was a fairly low monetary expansion period. www.forbes.com/sites/georgeleef/2014/01/10/one-bad-law-usually-leads-to-others-the-housing-bubble-and-dodd-frank/?sh=443c42b55be3
There is a critical error in the equation of exchange the video makes. No monetarist assumes prices are fixed or should be fixed by policy. Rather the classical model of money assumes you are in full employment, so output is fixed. Any increase in money increases prices. It doesn't say money must rise when output rises. It is a short run model saying output reaches a fixed a level that doesn't look at long run growth. So with output and velocity fixed monetary expansion causes inflation or inflation is caused by increases in money. Keynesians would argue if the quantity is less than full employment money will increase output and prices would be fixed. He misses the sticky prices part of Keynesians. So it is the Keynesians assuming fixed prices when you are below full employment. Keynesians think wages AND prices are sticky in recession. So a monetary expansion causes increases in output because prices don't move much below full employment or in the older AS/AD model that was still in texts in the 90's are fixed until you reach full employment. At full employment prices rise with money expansion. It simply doesn't cover a long run situation where output can rise beyond full employment (growth). So no it doesn't predict you need monetary growth with full employment output growth (long run economic growth raising full employment output). Baked into the model is a short term output that is capped at the full employment level. .
I am not saying Austrian economics isn't without value but beware of any economist who has a simple answer to everything. It was Hayek who said the curious task of economics is to demonstrate to men how little they know about they imagine they can build. That is why I find it strange when an Austrian falls to the pretense of knowledge of thinking his simple solution is the one true cause in all cases in all times. That was the fallacy that broke Keynes in the 70's. They thought they had all explained and bam a structural change they couldn't explain much less predict blows the whole thing up. The Austrians and Jevons gave us the marginal revolution which we all base our theories on today and can't be undersold or disregarded. Still it is odd to kind for an Austrian to come across as the one true theory.
Bitcoin
Like in most things, in Keynesian and Austrian economics what appears the most righteous way is the Mid Way, adjusting more to one side or the other according to outside conditions at the period of time.No fixed way is the most appropriate way.
The issue is the word “artificial credit expansion”. Isn’t that going beyond economics into anthropology. What’s artificial and natural? Since Mises is a moral positivist, isn’t every civilized thing “artificial” for him.
I remember a debate between an Austrian and a Keynesian and it came down to the difference between violating the NAP and not. But to a Keynesian this is irrelevant, because it’s an artificial arrangement anyway. To him a bailout is NOT LESS natural than the invisible hand. Because the invisible hand is not natural in the first place.
Deep, very deep and insightful. You need to write a book.
Huh? The invisible hand IS natural by virtue of the absence of coercion. Not only that, but the Keyensian is making a claim that he has found the solution to chaos theory and has a God's eye view of all economic transactions at any given moment as well as knowing all of their interrelational effects at every given moment, as this would be the knowledge threshold required for central planning to "work". However, this implies a logical paradox as this would also mean that the central plan changes every time another transaction occurs.
As a Chicago school guy I agree with the criticism of Keynes but think the video is being very dishonest about monetarism especially Friedman's version. Monetarists and Austrians are very close on the don't act and let the short term sort itself out. They agree with the Keynesians that policies have their intended effects while showing it always comes at the wrong time due to lags so don't agree it should be use. As Friedman put the analogy the right medicine was prescribed but at the wrong time. It is like putting your leg in a cast after it has healed because you have central planned medicine that can't give you the cast until a year later.
I would also add rational expectations which was formed by Friedman's students and supported Monetarist ideas of not reacting was extremely micro based on how people use current information to predict what the fed will do and therefore change behavior nullifying the effects of monetary policy. Which is a stark contrast to Keynesians investment is determined by mystical animal spirits. This debunking Freidman dishonestly is a disservice to the very similar ideas of non-intervention Chicago monetarism and Austrians have.
One final point, Friedman's views were influenced in no small part by the road to serfdom so to say he is just like Keynes but doesn't like fiscal policy is just intellectually dishonest.
Blindly applying your micro insights to the macro economy with no though to the nuance of complex dynamics and the nature of scale is poor science
Don’t lump Monetarists in with Keynesians
Okay a day of surface level research on schools of economics before watching this tells me the Mises Institute is named after one of Keynes' rivals - von Mises of the Austrian school. So right away, expect a bias. Also I understand the difference between fiscal policy and monetary policy, so I see the jab in the title - the suggestion Keynesian economics simply prints money. Very clever... with so much bias, not sure what I can truly glean, but now I know the ..overton window if you will... I can watch and see if I can extract any new interesting fundamentals to Austrian economic theory. Just saying this out loud, because today you have to go into all videos on economics and politics knowing the source.
He did set them up in street fighter fashion at the beginning. He's not hiding the ball or anything. This has been a longstanding war between theories.
If the Austrian economists is so smart, then why arent they in charge of the money? Just kidding I'm gay
emergence my friend , emergence . Economics isnt the sum of all micro transactions. In a global closed system where the Taliban use US dollars and there are more 100$ bills outside the US than 1$ inside the States you get multifarious emergent behavior that isnt apparent in the micro transactions. Thats why the Austrain school is only relevantin a small subset of the whole eg to African and developing nations or failing ones like the Austro-Hungarian empire .
It's like him arguing about why his wrong theory is less wrong than someone else's another wrong theory. Do economists even talk about the real world?
All the time. To what in his theory do you object?
Every economist had to study both micro and macro. So this guy is a big liar. Good macro is based on good micro.
Austrian economics is a bunch of baloney.
You are a piece of baloney. Lollllllllllllllllllllllll